In General, the Income Effect of an Increase in the Price

question 77

Multiple Choice

In general, the income effect of an increase in the price of a normal good will cause an individual to buy _____ of that good because he or she has relatively _____ income.

• A)more; more
• B)less; less
• C)more; less
• D)less; more

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Definitions:

Material Price Variance

The difference between the actual cost of direct materials used in production and the standard cost of those materials.

Standard Purchase Price

The predetermined cost of acquiring goods, set for budgeting and costing purposes.

Actual Purchase Price

Actual Purchase Price refers to the actual amount paid for goods or materials, including additional costs such as delivery charges and taxes.

Direct Material

Primary raw materials that can be specifically identified and directly charged to the manufacturing of a specific product.